The British Business Bank programme is making a new £40 million investment through peer-to-peer lender Funding Circle.

This investment will start on 1 March 2014 and is expected to support around £450 million of lending over the next 18 months.

This builds on an earlier investment of £20 million in Funding Circle in December 2012 through the Business Finance Partnership (BFP), a scheme which led to the current Business Bank Investment Programme. That funding has resulted in £130 million being lent to small and medium-sized enterprises (SMEs) through Funding Circle.

Business Secretary Vince Cable said: “The Business Bank is helping to support serious volumes of lending to small and medium sized businesses through new finance providers. Too much business lending is concentrated in the big banks and, if we’re to have a properly functioning business lending market, they need to be challenged by new banks, peer-to-peer lenders and other alternative providers.”

Peter Wilson, managing director of the British Business Bank’s Investment Programme, said: “The pace is really starting to build in terms of the momentum of our commitments and the impact that our Investment Programmes are making. The pipeline of future commitments is strong and we are seeing continuing interest through new applications to the programme.”

Samir Desai CEO and co-founder of Funding Circle added: “The Government has done a great deal to help raise the profile of non-bank lending over the last 12 months and has strongly encouraged greater competition in the market. Peer-to-peer lending has proven to be the preferred way for many businesses to borrow.

“Since Funding Circle was awarded £20 million through the Business Finance Partnership in March 2013, 2,000 businesses across the UK have accessed the finance they need to grow. Today’s commitment from the British Business Bank will ensure many more thousand businesses access the finance they need to grow – creating jobs up and down the country.”